LB Council approves proposed inclusionary housing ordinance to promote affordable housing production

Last night, the Long Beach City Council unanimously voted to scrap its voluntary affordable housing ordinance and draft a new mandatory inclusionary housing ordinance in hopes to create more affordable housing in the city.

The ordinance will require all residential rental developments to have at least 11% of its units reserved for very-low income households. For ownership properties, 10% must be set aside for moderate-income units.

A chart displaying the incomes that correspond with very low, low and moderate-income households. (City of Long Beach)

The inclusionary housing ordinance has been years in the making. In 2017, the State of California enacted Assembly Bill 1506, allowing jurisdictions the ability to create their own policies that impose affordable housing requirements on residential developments.

That same year, the city council approved 29 policy recommendations to encourage the production of affordable housing. Now, three years later, the council is taking the first step into making that policy part of Long Beach’s municipal code.

The city staff and Planning Commission recommended that 12% of affordable rental housing be split into 25% very low-income, 25% low-income and 50% moderate-income housing.

In a step to serve Long Beach’s very-low income communities, Councilmember Jeannine Pearce proposed that 11% of total units should be required to be very low-income, instead of 12% mixed incomes.

Their unanimous decision to approve the change aligns with the city’s obligation to develop more very low-income housing. In a 2017 Regional Household Needs Assessment, the city’s need for very-low income housing was almost twice as much as the need for low-income and moderate-income housing.

“We can all see that very, very low income is needed very much, twice as much as others, so I think that’s very important,” Councilmember Mary Zendejas said. “I firmly believe we must address this crisis with all the tools we have and use this inclusionary housing policy to bring forward some change in a positive way and some relief for all of our neighbors.”

Though some residents urged the council to implement the policy citywide, city staff outlined legal impediments in doing so.

Council approves three-year phase-in

The ordinance will phase in over the course of three years, with full compliance by 2023, to the dismay of multiple residents hoping for immediate implementation.

However, Director of Development Services Christopher Koontz stressed that the phase-in process is instrumental in avoiding a market shock.

“Because existing property owners have certain expectations of the development of that property or the sale of that property, all of those expectations change with the inclusionary policy,” Koontz said. “It takes sellers time to make peace with the reduced potential sales price of their property. Development can’t occur until a transaction occurs.”

A 2018 RNHA report stated that the city needs at least 4,000 affordable housing units to meet demand. The creation of these units is largely dependent on whether developers choose to create residential units and take on the loss of profit that comes with creating affordable units.

“The need for housing is huge in our city, but if we don’t do the phase-in correctly, we end up with what’s called a market shock,” Koontz said. “Which would be no development, which would be a failure in terms of the immediate need for housing.”

The city council also approved a covenant that guarantees that ownership units remain affordable for 55 years, up from the 45 years that city staff suggested, which could potentially act as a secondary deterrent for development.

The city council also discussed whether to extend the covenant length for ownership units. A covenant guarantees that a unit will remain affordable for a duration of time. City staff suggested a 45-year covenant, though councilmembers discussed the option of a 50 or 55 year covenant.

“The longer the affordability covenant, the greater the theoretical cost to the holder of the property,” Koontz said.

Assistant City Manager Linda Tatum urged the council to maintain the 45-year covenant, to no avail.

“That lower number of 45 for ownership projects is, by policy, a way of incentivizing projects, and we think that’s a good thing,” Tatum said. “We think it will help incentivize the opportunity for additional ownership units in the city. We just don’t get a lot of those, so every opportunity we have to push that. We think it makes sense as a city policy.”

In the end, the city council unanimously approved a 55-year covenant for ownership units.

A map illustrating the regions where the inclusionary housing policy will take effect starting January 1, 2021 with a three-year phase-in process. (City of Long Beach)

Ramping up in-lieu fees to deter developers from paying their way out of affordable housing construction

When a developer doesn’t want to create affordable housing units, they have the option of paying an in-lieu fee.

In the staff’s recommendation, developers would be charged anywhere between $223,000 to $383,000 in in-lieu fees per unit to comply with the policy.

Councilmember Jeannine Pearce proposed upping these fees and was met with approval from the council.

“We do not know how fast we’re going to come back from the economic downturn that COVID has taken us under,” Councilmember Dee Andrews said. “I want to be supportive of a policy that will be clear and conducive for when times are appropriate to build again. We need a policy that is fair and does not allow builders to pay their way out of accommodating low income residents.”

Additional changes to the ordinance

In addition to these changes, city staff will come back with a proposed no net-loss ordinance for the city, mimicking the one that already exists statewide. When a development is no net-loss, it must maintain the same number of affordable units as the previous development.

City staff will also do a legal analysis on eliminating offsite options for development.

Later this year, when the council is done with deliberations on next year’s city budget, the proposed ordinance will come back for its first and second readings.

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